Venezuela

Switched off

THE people of Venezuela are paying the price of their government's slowness in pushing through privatisation. For three hours last month most of the country was without electricity, after an explosion at a state power company. Hundreds of thousands of commuters were stranded, thousands of businesses and factories closed.

For years, state utilities have cried out for investment to repair their crumbling equipment. But they could not afford it: charges were deliberately kept low, for political reasons. And governments have not listened. Short of cash, they were disinclined to spend what there was on firms that would eventually be sold to private owners. Let them do the repairs.

Now congressional critics are saying that the country, with hydroelectric potential coming out of its ears, may have to adopt power rationing next year, as the national grid lurches towards collapse. Further blackouts seem certain.

The government, now basking in higher oil revenues, does not seem to care. This year was touted as the year of state sales: in January ministers were talking of selling four aluminium companies, two steel businesses, several hotels and some electricity enterprises by December. Today, the best it looks likely to achieve is to get rid of the hotels.

Incompetence, lack of political will and pre-election shivers are all to blame. An extension of last year's $1.4 billion stand-by from the IMF is at risk. The IMF, fed up, is urging the government to get selling fast, but it has dragged its feet on other IMF recommendations, and President Rafael Caldera has resisted the pressure this time. That makes political sense: privatisations mean lost jobs, and presidential elections are due in December 1998. But it calls into question the government's commitment to its economic blueprint, the “Agenda Venezuela”. Foreign investors are worried.

The state companies are quickly losing their value. The largest of the steel enterprises, Siderurgica del Orinoco, is profitable, unlike many firms in the government's portfolio. But it needs heavy investment to stay that way. So it was to be sold. The government submitted the draft contract to Congress with great fanfare, and intimated that passage would come within weeks, even if special sessions would be needed to get it through. Instead, the contract languished. Only prodding from within Congress got the government to take steps to give it even half a push ahead. Labour unrest and rising unemployment also threaten the sale. Congressmen have written into the proposed contract clauses forbidding lay-offs in the first year.

A divided Congress, in which the government's party holds only one-fifth of the seats, is expected to vote on the measure once regular sessions are resumed next month. But that could be too late for a 1997 sale. Officials say they will need at least 45 days after the contract is approved to make preparations for the sale, let alone complete it. Meanwhile, debate on the 1998 budget is scheduled for the same time, and the largest party, Accion Democratica, is still sitting on the fence. And now Alberto Poletto, head of the body that oversees state sales, is to leave that post to become ambassador to Canada. With an election due soon, many believe the sale will be left over for the next administration.

The sale of the aluminium companies is even further behind, and generating even fiercer opposition. Mr Caldera has never loved privatisation. During his election campaign in 1993, he said the only change he had noticed after the partial sale of the state telephone company was higher bills. But if he waits too long, his successor may inherit a museum of industrial archaeology that no one will buy anyway.